City of Ocala underwrites its own $8 million loan

Wednesday

The money for a new community center in northwest Ocala will come from city reserves at 2% interest.

The City of Ocala got creative in financing its latest community project, effectively borrowing the $8 million for construction of a community center from itself.

While the strategy isn't new, this inter-fund loan — as they are called — is the biggest in the city's history.

On Tuesday, the Ocala City Council voted 4-0 to approve the plan. Council President Mary Sue Rich did not attend the meeting.

The 20-year loan has a 2% interest rate. The money comes from reserves in the general, electric and water resources funds. According to the city, $2 million will come from the general fund reserves, while $3 million each will come from electric and water reserves. The interest rate is the same as the 20-year treasury rate on Sept. 10.

Before the vote, Councilman Jay Musleh asked if the city had taken into account the possibility of rates increasing.

"With the expectation of the markets, with our investment managers, we go back five years and (rates) were below 2%," said Emory Roberts, director of finance and customer service for the city.

Roberts said the reserves in each fund stand at more than $15 million, and there should be enough in each fund for any contingency. The money in the funds come from fees paid by residents including for water, sewer and electric services.

"This is a very important project. We're still getting interest on that money, and it's a good cause," Roberts said.

Roberts said the interest rates the banks wanted to charge were higher. With the inter-fund loan, the West Ocala Community Redevelopment Agency will save $1 million in interest over the life of the loan compared to the rates offered by other lenders. As it stands, the CRA will pay $1.6 million in interest over the 20-year term.

"That $1 million can instead go to other community projects instead of interest payments. It's really a win-win," Roberts said.

The city has four CRAs, which each get a percentage of tax revenues to spend directly on projects within the area. The West Ocala CRA will use that money to make the annual $400,000 loan payment.

In March, the City Council approved plans to build the community center at the site of a long-abhorred charcoal plant in the 1900 block of Northwest 17th Place. Construction should start in December and end by spring 2021.

In July, the Marion County Hospital District pledged $2.3 million toward the 42,000-square-foot facility, which will include a gymnasium and community meeting rooms.

The city previously used inter-fund loans to help start the Ocala International Airport terminal project and to partially fund the first-responder campus near Tuscawilla Park. Both loans got approval in 2018. The airport loan was about $161,000, and the first-responder loan was for $2.1 million.

Contact Carlos E. Medina at 867-4157 or cmedina@starbanner.com

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